The CFPB announced that it and the OCC have issued a consent order against two affiliated banks alleging violations of federal consumer protection laws for deceptive marketing of their add-on products (i.e., payment protection, credit score tracking, identity theft protection and wallet protection). The banks were found to have engaged in unfair billing practices, in violation of UDAAP, between October 2005 and June 2012 by charging customers for identity protection products that were neither properly authorized nor ultimately received by the customers. In some instances, customers were charged for interest and fees incurred as a result of exceeding their credit limits due to the additional costs charged for the products. 

The consent order calls for civil money penalties of $20 million and up to $309 million in restitution to the banks’ customers. This is the third in a line of enforcement actions taken against supervised entities related to credit add-on products (see July 24, 2012 Alert and October 2, 2012 Alert). In addition to the civil money penalties and consumer restitution, the banks are required to develop a consumer compliance internal audit program, submit to an independent audit and improve third-party vendor oversight a compliance program. The OCC separately ordered the banks to pay $60 million in civil money penalties.

The OCC also took enforcement action against the banks related to their collections litigation practices and the banks’ efforts to comply with the Servicemembers Civil Relief Act. The banks are required to provide remediation for eligible servicemembers and conduct an internal audit of its collections litigation practices.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.